A quick and easy checklist for selling a business in California
Selling a business is rarely easy, but it can get you out of a jam or let you finally reap the profits of your hard work. So, we’ve broken down the complex process of selling a business in California into four essential steps that will give you the foundation of knowledge for what you can come to expect.
1. Preparation
When preparing for selling a business in California there are a few key things to consider. Make sure you are properly estimating your business’s value by conducting some simple market research on sales prices for similar businesses within your industry. Hiring a valuation expert can help you ease any concerns you may have about this rough estimate.
You will also need to advertise the sell of your business, which can be done with a selling memorandum (a document that offers factual information about many of your company’s operations).
Finally, it is important to organize any vital company documents, including contracts or agreements for potential buyers and determine whether you will be seeking an asset or entity sale.
2. Negotiation
As with any sale, the negotiation is probably the most important aspect of selling your business. If you have chosen to hire a valuation expert, you should have the upper hand when negotiating the purchase price, but this doesn’t mean you shouldn’t allow some flexibility.
Additionally, you will have to decide if you are seeking a lump sum as payment or willing to negotiate a payment period for the buyer. The latter is the most common option, and if this is what you choose, the terms of financing and interest will need to be made clear prior to purchase. Another option (If you have a lease on office space) is negotiating a sublease arrangement so that the buyer can take over your current lease.
3. Inspection
A lack of transparency can torpedo all the effort you’ve put into negotiations. A buyer will need ample time properly to inspect your business and confirm that what you have promised them is up to par. This includes everything from inventory and contract agreements, to employees and equipment. Many buyers will conduct a background check as well in the form of calls to past vendors and business partners. Honesty is your best asset; use it to your advantage.
4. Closing
You’re almost there. Finalizing the sale of your business means you must finalize the purchase agreement between yourself and the buyer. This is when having a seasoned attorney can prove exceptionally valuable.
Once the language of the agreement is determined, both parties will sign, and the final transfer of ownership and possession of the business will occur on the date stated on your contract, including when the seller will receive the money.
Additionally, there may be further requirements if your business must comply with the “Bulk Sales Law” and there are differences between closings for an asset and entity sale, too. We’ve provided a link to a more detailed list on how to ensure a smooth closing if you need.
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